Upbeat analyst report boosts chip sector

Chips shares get a boost on forecasts that the semiconductor industry could see an upturn in the fourth quarter of 2001

Monday was a good day for companies in the chip sector, with many seeing their share price rise after Goldman Sachs suggested that the worst could soon be over for the struggling sector.

UK chip designer ARM saw its shares rise by over five percent to reach 297 pence in afternoon trading, having peaked at over 300 pence around lunchtime. Goldman Sachs issued a report on Monday that recommended buying Intel, Maxim Integrated Products and Analogue Devices, raising all three companies to a "recommended" list of stocks.

Goldman Sachs analyst Terry Ragsdale suggested that the chip sector could be heading for improved financial climate in the fourth quarter of this year. "Data points are no longer universally negative, and fundamentals are likely to strengthen in the fourth quarter, even if the improvement is only inventory-related,'' Ragsdale wrote in a report.

The Goldman Sachs recommendations come as a relief to the chip sector, which has been badly hit by the recent slump in the technology sector. A drop in sales of high-tech products such as computers and mobile phones has meant less demand for semiconductors. Recent disappointing results from chip-makers have been accompanied by warnings that the situation might not improve before 2002.

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